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Analysis | April 19, 2021
According to the latest TrendForce surveys, with their flexible pricing schemes and diverse service offerings, cloud service providers have been a direct and major driver of business demand for cloud services.
As such, the rise of CSPs has in turn resulted in a gradual shift in the dominant business model of server supply chains from selling traditional branded servers (i.e. OEM of servers) to ODM direct sale. Incidentally, the global public cloud market operates as an oligopoly dominated by North American companies such as Microsoft Azure, Amazon Web Services (AWS), and Google Cloud Platform (GCP), which collectively hold a share of over 50% of it. market. Specifically, GCP and AWS are the most aggressive in building their data centers. Each of these two companies are expected to increase their server purchases by 25-30% year-on-year this year, followed closely by Azure. TrendForce reports that in order to expand the presence of their respective ecosystems in the cloud services market, the three aforementioned CSPs have started to collaborate with telecom service providers and national telecom operators in various countries, in accordance with the regulations in force. data residency and sovereignty. For example, with the acceleration of data transformation efforts underway in APAC regions, Google is stepping up its supply chain strategies for 2021. As part of Google’s efforts to build and refresh its data centers, The company is not just stocking up on weeks of more memory products, but it has also increased its server orders since 4Q20, in turn leading its ODM partners to expand their SMT capabilities. When it comes to AWS, the company has benefited from activities related to the new post-pandemic normal, including WFH and enterprise cloud migrations, both of which are major sources of data consumption for the public cloud. ‘AWS. Conversely, Microsoft Azure will take a relatively more conservative and conservative approach to server provisioning, likely because the Ice Lake-based server platforms used to power Azure services have not yet entered mass production. . In other words, it is only after these Ice Lake servers go into production that Microsoft will likely increase its server purchases during 2H21, during which TrendForce expects demand for servers Microsoft has peaked, resulting in 10-15% year-on-year growth in server supply through 2021. Finally, compared to its three competitors, Facebook will experience relatively more stable supply growth of servers due to two factors. First, the implementation of GDPR in the EU and the resulting data sovereignty implications mean that data collected on EU residents is now subject to the legal regulations of their respective country, and therefore more servers are now needed to meet national data processing and storage needs. stem from the GDPR. Second, most of the servers used by Facebook are customized to business requirements, and Facebook’s server requirements are therefore higher than those of its competitors. As such, TrendForce predicts double-digit year-on-year growth in Facebook server purchases this year.
Chinese CSPs Limited in Rate of Expansion, While Tencent Outstanding With 10% YoY Increase in Server DemandIn contrast, Chinese CSPs are expected to be relatively weak in terms of server demand this year due to their pace of expansion and relatively limited service areas. As an example, Alicloud is currently planning to procure the same volume of servers as last year, and the company will only increase its server purchases after the Chinese government implements its new policies of infrastructure. Tencent, which is the other dominant Chinese CSP, will benefit from increased business activities of domestic online service platforms including JD, Meituan and Kuaishou, and therefore experience corresponding growth in its server colocation business; Demand for Tencent’s servers this year is expected to increase by around 10% year-on-year. Baidu will mainly focus on autonomous driving projects this year. There will be a slight year-over-year increase in Baidu’s server purchases for 2021, mainly driven by its increased demand for roadside servers used in autonomous driving applications. Finally, as far as Bytedance is concerned, its server supply will experience a 10-15% year-on-year drop as it will look to adopt colocation services rather than running its own servers in overseas markets due to its presence in foreign markets. decline in these markets. Looking ahead, TrendForce believes that as corporate clients become more familiar with the various cloud services and associated technologies, competition in the cloud market will no longer be confined to the traditional segments of IT infrastructure, storage and networking. Major communications service providers will pay more attention to emerging areas such as advanced computing as well as software-to-hardware integration for related services. With the commercialization of 5G services taking place around the world, the concept of “cloud, edge and device” will replace the current “cloud” framework. This means that cloud services will not be limited to software in the future, as cloud service providers may also wish to offer their branded hardware in order to make their solutions more complete or holistic. Therefore, TrendForce expects hardware to be the next battleground for CSPs.